Interest is growing globally in new sources of funding for renewable energy projects to help advance sustainable development. Emerging markets around the world have begun to make progress in the use of green bonds, pioneered by European countries some years ago.
According to a report by Oxford Business Group, several Arab and Islamic countries are now looking at green bonds to fund economic projects while preserving the environment. Recently, the Red Sea Development Company, a developer of Saudi tourism projects, secured green bonds worth 14.1 billion Saudi riyals ($3.8 billion) from four Saudi banks, with funds earmarked to build 16 renewable-energy hotels across the country.
Indonesia was also able to raise $3 billion in sovereign sukuk (Islamic bonds) to help it finance sustainable development projects as part of its interest in green finance. Within the next two years, it is expected that the Central Bank of Iraq will issue green bonds amounting to more than one trillion dollars to support a number of economic projects.
All these steps and developments reflect the ability of countries to move towards exploiting their potential in renewable energy to higher levels, which will lead to the promotion and marketing of more environmental projects and the demand for more such financial instruments. The total size of green finance is expected to reach $500 billion in 2021 compared to $270 billion last year, an increase of 46 per cent.
Great efforts have been witnessed this year in the establishment of renewable energy projects and exploiting alternative energy resources around the world. Financial institutions have strengthened their funding efforts towards this goal as well.
The European Union has launched many programmes through to the year 2050 with funds pledged to member states to support investments in clean energy projects with a view to reducing carbon emissions. The EU is also rolling out a number of innovative financial instruments, including sustainability bonds, representing finance to fund green and social projects during the Covid pandemic.
Blue bonds are similar in function to green bonds as debt instruments that are issued to support investment in green initiatives and the blue economy. Several countries in the world have succeeded in establishing tourism projects by relying on renewable energy and obtained financing for expansion in marine areas, fish projects and others.
There are also several countries that are launching debt swap projects as part of their strategy to restructure their sovereign bonds. This is a trend in Latin America and the Asia-Pacific region, due to the significant impact of the pandemic on their tourism projects resulting in large-scale job layoffs.
In our region, we can take advantage of these financing programmes to accelerate the implementation of renewable energy projects and thereby stimulate wider economic development and employment generation.
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